revenue management systems

revenue management systems

Optimizing Revenue Management Systems in the Hospitality Industry

1. Introduction to Revenue Management Systems

The purpose of this study is to introduce the paradigm of implied-parity hotel room pricing, which displays considerable promise as a time-efficient and low-cost optimization procedure for hotel managers. This investigation includes an analysis of the general strategy and a successful case study involving a three-star hotel. The intervention attracted higher demand—mainly from the typically price-sensitive domestic tourist market—garnered a higher number of direct bookings and outperformed competitors. Results demonstrated how the niche strategy can assist recession-stricken destination economies, the contribution of high-performance distribution partnerships, and the pivotal role that human factors, such as culture, education, and technology, play in a revenue management system (RMS). Different pricing strategies are considered tokens of human management responses, which reflect beliefs and conventions for influencing customers. The current literature focuses more on technology. Personality and interpersonal relations could play as essential a role in hotel customer segmentation as culture and motivation in Milton Friedman’s eponymous economic model. However, the hospitality and travel management literature mostly overlooks this facet.

2. Key Components and Functionality of Revenue Management Systems

Hotels attempting to maximize their profits face different rates on Thursday, Friday, and Saturday nights. Tuesday and Wednesday nights usually have lower rates. Hotels that control the supply better than the competition, besides being able to adopt different rates, may use the rates as the means of pressure within depending on the many factors that have a bearing on the fluctuating supply and demand of overnight accommodations, varied demand. Distinct pricing schemes can be used by a hotel that wants to acquire specific types of customers or to motivate people to plan trips at times that are more convenient.

While the demand for rooms must be expected to have a revenue management system, not only allows to create accurate short-term forecasts by examining purchase patterns, yet it additionally allows to set the specified value of the room actively. To comprehend if it is convenient to adopt this methodology, an investigation of the results obtained by it is carried out through the case study.

Revenue management is an essential tool for generating demand in the current economic landscape in which the hospitality industry is established, as it allows for profit optimization through more effective revenue management. The technology has evolved significantly over the years, offering everyone, no matter how small, the chance to access current technology and adopt dynamic pricing strategies that allow them to optimize their benefits.

3. Best Practices for Implementing Revenue Management Systems

Optimizing Revenue Management Systems In The Hospitality Industry Many of the best practices for successful revenue management implementation are similar across industries. One measure used effectively in one industry is price fencing, which involves the strategic setting of prices and the conditions associated with those prices. How prices are communicated and perceived at different points of sale and the methods used to protect the premium or discount are clearly important. For example, if prices vary significantly across different sales channels and that differentiation is not perceived to be equitable, customer confusion and revolt may result. This may be particularly true in hospitality, where front office personnel often have very close customer relationships.

The hospitality industry continues to rapidly integrate revenue management into its daily operations. Increasing competition both within hospitality segments and from the broader travel industry has heightened the need for effective revenue management. Unlike other industries, the hospitality front office is a critical point of customer contact. Properties balance a tradeoff between price-driven customer relationships and the bottom-line need for increased revenues.

Based on our experience and research, we offer here some best practices for the successful implementation and operation of revenue management. They can suggest a roadmap for managers trying to implement a revenue management system. The most important phases are: starting at the top, forecasting, managing data, considering technology and vendors, segmenting customers, ensuring validity and reliability, sharing information across the organization, understanding customers, evaluating pricing, tracking performance, and hiring the right practitioners. These represent general considerations. We will discuss some industry-specific applications in the following areas.

4. Case Studies and Success Stories in Revenue Management

Introduction. In an effort to present the real excitement and genuine enthusiasm and provide a deep understanding of the complexities, we would like to present a few case studies and success stories in this part. Commercial revenue management, although can trace its theoretical foundation to solve military problems in World War II era, is today being used by a wide variety of industries to optimize their revenue. Specifically, commercial airlines, hotels, casinos, golf courses, rental car firms, and the cruise line industry have successfully implemented revenue management strategies to optimize their revenue. Moreover, revenue management has extended its reach beyond the hospitality and leisure industry and increasingly being applied across a wide spectrum of businesses, including surface transportation, manufacturing transportation planning, and supply chain pricing and planning. In fact, the technique was so successful and generated so much revenue that it caught the eye of the executives and managers of firms in other industries. These success stories of revenue management applications would not be complete without mentioning a few applications in the broader computer science community.

Chapter Summary. In this part, we will present a few case studies and success stories in the broader context of revenue management. At first, we will discuss two success stories that were recently very successful in optimizing their respective algorithms to the next level. Both the success stories came in professional sports and are discussed in the first chapter of this part. However, such discussions about success stories would not be complete without discussing A.P. Møller – Mærsk Group, who is a volume leader in revenue management. We will discuss how they revolutionized the import leg of their revenue management functions by re-sorting containers on the ship from a traditional first come first serve. Afterwards, we will discuss a service offering problem in the airlines industry that requires dividing an aircraft into classes.